1. The closing date. See if the date the buyer wants to take title is reasonable for you.

2. Date of possession. See if the date the buyer wants to move in is reasonable for you.

3. The earnest money. Look for the largest earnest-money deposit possible; since it is forfeited if the buyer backs out, a large deposit is usually a good indication of a sincere buyer.

4. Fixtures and personal property. Check the list of items that the buyer expects to remain with the property and be sure it’s acceptable.

5. Repairs. Determine what the requested repairs will cost and whether you’re willing to do the work or would rather lower the price by that amount.

6. Contingencies. See what other factors the buyer wants met before the contract is final—inspections, selling a home, obtaining a mortgage, review of the contract by an attorney. Set time limits on contingencies so that they won’t drag on and keep your sale from becoming final.

7. The contract expiration date. See how long you have to make a decision on the offer.

Answer these questions to help you decide whether moving up makes sense.

1. How much equity do you have in your home? Look at your annual mortgage statement or call your lender to find out. Usually, you don’t build up much equity in the first few years of paying a mortgage, but if you’ve owned your home for a number of years, you may have significant unrealized gains.

2. Has your income increased enough to cover the extra mortgage costs and the costs of moving?

3. Does your neighborhood still meet your needs? For example, if you’ve had children, the quality of the schools may be more of a concern now than when you first purchased.

4. Can you add on or remodel? If you have a large yard, there might be room to expand your home. If not, your options may be limited. Also, do you want to undertake the headaches of remodeling?

5. How is the home market? If it’s good, you may get top dollar for your home.

6. How are interest rates? A low rate not only helps you buy more home, but also makes it easier to find a buyer.

It’s an objective opinion of value, but it’s not an exact science so appraisals may differ.

For buying and selling purposes, appraisals are usually based on market value—what the property could probably be sold for. Other types of value include insurance value, replacement value, and assessed value for property tax purposes.

Appraised value is not a constant number. Changes in market conditions can dramatically alter appraised value.

Appraised value doesn’t consider special considerations, like the need to sell rapidly.

Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer.

Used with permission from Kim Daugherty, Real Estate Checklists and Systems (http://www.realestatechecklists.com).

When you sell a stock, you owe taxes on your gain—the difference between what you paid for the stock and what you sold it for. The same is true with selling a home (or a second home), but there are some special considerations.

How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate this:

1. Take the purchase price of the home: This is the sale price, not the amount of money you actually contributed at closing.

2. Add adjustments:
 Cost of the purchase—including transfer fees, attorney fees, inspections, but not points you paid on your mortgage.
 Cost of sale—including inspections, attorney’s fee, real estate commission, and money you spent to fix up your home just prior to sale.
 Cost of improvements—including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.

3. The total of this is the adjusted cost basis of your home.

4. Subtract this adjusted cost basis from the amount you sell your home for. This is your capital gain.

A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:

 You have lived in the home as your principal residence for two out of the last five years.
 You have not sold or exchanged another home during the two years preceding the sale.

Also note that as of 2003, you also may qualify for this exemption if you meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.

There are several reasons to refinance your home:
• To lower the interest rate on your mortgage, reducing your monthly payments and overall cost;
• To reduce the term or length of your loan, doing so can save you thousands of dollars in interest;
• To provide a means of consolidating your debt.
All of these are excellent reasons to pursue refinancing, but several issues should be considered first.
Refinancing is similar to the process you encountered when you closed on your first mortgage. It requires an application, credit check, new title search, as well as an appraisal and other fees. As you know, this process can be quite lengthy and expensive.
As a rule of thumb, it pays to refinance if you can get an interest rate at least one percentage point lower than what you are currently paying. However, every situation is different. Some lenders are offering reduced fees or no points. Asking yourself a few questions may help you determine if you can save money:
• How much can I lower my current monthly payment?
• How long do I plan to stay in the house after I refinance?
• How much will I pay in refinancing costs?
Knowing these items will help you figure out where you break even and when you begin saving money. Consider the following example: you plan to stay in your home for another four years, refinancing will save you $85 per month, and the costs of refinancing will be $2200. In this case, it would take 26 months, or just over two years, to recover the costs of refinancing and begin saving money, making it worthwhile for you to refinance your home.
It’s a big decision; there’s no doubt about that. It’s big because it can have a huge, long-term effect on your family’s wealth (or lack thereof). Refinancing isn’t cheap, for one thing. The lending fees and closing costs alone likely will zing your net worth to the tune of more than two thousand dollars
Consider This Before Refinancing

Refinancing a mortgage is dependent largely on one’s personal financial situation. There are several mortgage options available in the market today. It is advisable to first evaluate each option before taking a decision. If the right option is unavailable, it sometimes better to forgo the refinancing altogether.

Below are some important points that merit some consideration while deciding on a refinance option:

• Funding and Fees: Refinancing a mortgage will require that you have sufficient funds to take care of up-front costs and fees. If you do not have adequate funds to pay for these initial costs, it may be possible to finance these costs by adding them into your mortgage, should you decide to take one. This results in slightly higher monthly costs, as your mortgage becomes larger with the fees included

• Recovering the costs: Refinancing costs and fees are typically recovered within 2-3 years. Hence, if you are thinking of selling your property before then, or paying off the loan within a short duration, then refinancing is probably not suitable. There will be insufficient time to recover your initial costs. However, this also depends on the amount of savings you will have with the new mortgage, as well as the amount of up-front costs.

• Income levels: Another factor to take into consideration is your income. If your income has increased significantly, then the chances of you being able to afford higher monthly payments will be higher, and help you to decrease the term of your mortgage. If the existing interest rate is lower for a shorter mortgage term than it would be for a longer-term mortgage, then refinancing is a good bet. Otherwise, it is better to just make larger principal payments against your current mortgage.

• Adjustable Rate Mortgage (ARM): If the existing interest rates for a fixed rate mortgage are the same as (or little higher than) the Adjustable Rate Mortgage, then refinancing can be justified. If the fixed rate is lower than it is anticipated to be when the ARM changes over to a fixed rate, then you might also strongly consider the refinance option.

In short, it is important to thoroughly think through your refinancing options. It should be re-examined periodically by considering changes in your financial status, as well as those due to fluctuations in the economy. You may find that deferring your refinancing option for a later time can save you considerable money.

Ok, you’ve probably heard about the “Mortgage Crisis”…but what does that mean exactly? Up until recently the mortgage industry had been enjoying a freedom never before experienced. In greatly appreciating markets across the U.S., banks and mortgage companies offered various types of home financing options which required less income and asset verification, as well as reduced credit requirements for borrowers. The banks reasoned that they were somewhat protected against any losses due to the increasing value of the homes. These creative loans were comprised of adjustable rate mortgages, interest only, negative amortization, or no/low money down. So, when the ARM rate changed, or the negative amortization was called due, or a buyer went to sell and there was no equity in the home, borrowers found themselves in a pickle. Coupled with many markets now depreciating, which was not expected, it was a disaster!

So, what’s the good news? The Fed is stepping in to help folks in some of these “bad” loans refinance into government backed, fixed, low interest rate loans. These loans are also available for purchases, which will replace the subprime loans of the recent past. The underwriting guidelines are tightening and will be more common sense, preventing someone from getting into a home that they truly cannot afford. Rates remain at all time lows and are expected to drop further over the course of the next six months. And many folks in the mortgage and real estate industry who were unethical or practiced bad business have been turned out on their ears.

If you surround yourself with trusted professionals, it is a wonderful time to buy, sell, or refinance your home!